World is Flat, Earnings Are Up

Volumes have flattened in the third quarter but chemical makers have still managed to post higher earnings as prices and revenue continue to rise.

BASF’s chemical operations and DuPont reported volume growth of 1%, while Dow Chemical and PPG Industries were flat. China and emerging markets continue to post solid year-over-year volume growth, offsetting flat and declining markets elsewhere. Demand in automotive, agriculture, consumables, and energy-related sectors continues to advance, offsetting weakness in construction, electronics, and industrial markets. There are wide swings by region and segment, but when added up volumes are coming out flat on a year-over-year basis.

“The new reality is that the world is operating as a two-speed global economy with the developing world strong, and the developed regions showing slow-to-no growth,” Dow CEO Andrew Liveris said last week. Liveris expects “at a minimum, we will be in a slow growth environment in the developed world for the next several quarters.”

Despite tough macroeconomic conditions, earnings remain very healthy and producers are sticking to profit targets. Measures put in place at the onset of the 2008 crisis—including tight cost control, capacity shutdowns, and disciplined price-volume management—have put industry in a position to generate solid results, even if economic conditions don’t cooperate.